The Markets May 15, 2018

401(k) Investors Moved From Equities into Fixed Income in April

The flows went primarily to bond, stable value and money market funds.

Reported by

Among the 401(k) investors who made trades in April, the majority moved from equities into fixed income, according to the Alight Solutions 401(k) Index.

Bond, stable value and money market funds accounted for nearly all of the new trading inflows during the month. The outflows came primarily from U.S. equity, target-date and international funds.

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Bond funds took in 41% of the inflows, stable value funds received 37%, and money market funds, 12%. Investors took $158 million out of large U.S. equity funds, which accounted for 49% of the outflows. That was followed by $95 million in redemptions from target-date funds (30%) and $42 million from international funds (13%).

There were four days of above-normal trading activity, up slightly from March but lower than January and February. At the end of April, 68.4% of balances were invested in equities. In terms of new contributions during the month, 68.2% went to equities, down slightly from 68.7% in March.

By the end of April, target-date funds held $55.62 billion in assets, comprising 28% of 401(k) balances. That was followed by large U.S. equity funds, which held $48.02 billion, accounting for 24% of 401(k) balances, and stable value funds, which had $20.43 billion in assets, comprising 10% of 401(k) balances.

Products May 14, 2018

Court Orders Past Trustee to Reimburse Plan Beneficiaries

The former owner is also barred from serving as a fiduciary, trustee, agent, or representative to an employee benefit plan. 

Reported by

The U.S. District Court for the Eastern District of North Carolina has ordered the former owner of House of Lights Inc. to pay a restitution of more than $1 million to the company’s profit-sharing plan, after it was found he had issued checks for purposes prohibited under the Employee Retirement Income Security Act (ERISA).

Thomas E. Beverly Sr., who also served as the plan administrator and trustee to the company, will have to pay $1,639,983 restitution to the plan—which includes lost earnings of $331,121—and is ordered to hire a successor fiduciary who will take care of the restitution towards plan beneficiaries. According to the court, Beverly will have to issue the restitution by September 15.

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In an investigation by the U.S. Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA), it was found that Beverly had issued checks from the plan’s checking account to the House of Lights, himself and others for $1,308,862, which violated ERISA, from November 2011 to January 2014. The House of Lights Inc. Pension Plans & Trust had merged with the House of Lights Inc. Profit-Sharing Plan back in October 2010.

Beverly disclosed that some of the checks issued had gone towards payments for company-owned and personal properties. In addition to the restitution charge, Beverly is permanently prohibited from violating provisions of Title I of ERISA, and from serving as a fiduciary, trustee, agent or representative to an employee benefit plan.

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